Pringles Deal May Pop for Diamond Foods: Analysts

NEW YORK ( TheStreet) -- Procter & Gamble ( PG) is expected to "walk away from the Pringles deal," a KeyBanc Capital Markets analyst said in light of Diamond Foods ( DMND) announcement Wednesday that it needs to restate its financials for the last two years because of accounting problems.

If Diamond Foods owned Pringles for all of fiscal 2011, the combined company would have had net sales of about $2.4 billion and estimated earnings before interest, taxes, depreciation and amortization of between $398 million and $410 million, according to Diamond Foods.

"We assume the Pringles deal will be called off now, leaving DMND liable for a $60 million breakup fee to P&G," Jefferies analysts wrote in a report Thursday.

Jagdale maintained his hold rating on the stock.

"As for fair value, we believe DMND is worth $44 excluding Pringles in a break-up scenario based on our sum-of-the-parts valuation and worth $33 excluding Pringles, Walnut and Other Nuts," Jagdale wrote in a report.

Looking ahead, one of Diamond Foods' biggest issues the effect its restatements will have on the company.

"A complicating factor is that the restatements will most likely lead to DMND tripping its debt covenant, which would force the Company to renegotiate at most likely a higher interest rate," Jagdale said. "We believe the stock will trade well below what we consider is fair value until the financial statements are restated, the Company finds a permanent replacement for the interim CEO and CFO positions, and the debt covenants are renegotiated."